Today’s victory by BSkyB in its £709 million (US$1.15 billion) court case against HP-EDS could represent a serious threat to current outsourcing practice, and is likely to fundamentally change project management.
That is the initial view of a former director of industry body the National Outsourcing Association who told Computerworld UK that the judgement had the potential to drastically change how IT providers make sales, draw up contracts, and conduct work.
Sky said today it expects to be awarded “at least £200 million”. The Technology and Construction Court upheld its claim that EDS had fraudulently misrepresented its abilities ten years ago, when pitching for a contract to deliver a £48 million customer system. HP, EDS’ new owner, insisted today that it had not deceived Sky in any way, and said it would appeal.
While EDS is believed to be privately disappointed with its performance on the contract, the company is publically adamant that it had not deceived BSkyB.
The main judgement, which is over 500 pages long, is understood to have found that what EDS said when pitching the contract could be held as a definite statement of its abilities. The finding was today described by outsourcing experts as “game-changing”.
“This potentially drives a coach and horses right through IT contracts,” said Nigel Roxburgh, research director at industry body the National Outsourcing Association, as early details emerged.
Entire Agreement Clauses, normally featured in contracts, state that only what is explicitly promised in the contract can be held as fact, rather than anything else. The judgement would appear to indicate that BSkyB had successfully demonstrated this clause could be circumvented, if the supplier’s claims were misleading enough to be allegedly fraudulent.
“The clauses exist to protect both the customer and the supplier,” Roxburgh said. “They aim to make it clear that only what’s in the contract is what’s going to happen, but if this finding works around them then maybe that’s going to change.”
Roxburgh said he anxiously awaited the publication of the full verdict so he could analyse its ramifications in full.
Sources close to the case told Computerworld UK that the original sales pitch was presented by a small number of EDS staff, with up to 60 other EDS staff involved in the bid process. Whether any claims by individual staff at the presentation, or in subsequent phone calls and emails, formed part of the alleged “misrepresentation” — or whether the whole presentation was judged as misleading — remains to be seen.
Suppliers would now have to tread a careful line when pitching for deals, industry sources said. That line would fall between making a strong enough pitch to beat competitors to the contract, and a sober enough presentation that represented exactly what would end up being delivered.
This raised questions, according to Roxburgh, because it was typically “difficult to tell at the start exactly how contracts will work out and what is required”.
He added: “How will all the data in sales pitches and informal conversations be documented? It’s so hard to do and so easy for misunderstanding. It changes everything.”